Tiny Tech Startup Lures Intriguing Operatives

It is the tiniest of tech startups in Boulder, Colo., with a string of quarterly losses and a stock that trades for pennies.

It has no employees. Its founders came from Canada. Its financial reports include a "going concern statement" that raises "significant doubts" as to whether the company will even survive.

Nevertheless, eCrypt Technologies Inc. (ECRY) has been quietly loading its board with directors touting high-powered U.S. military and homeland security connections.

This includes former Republican U.S. Rep. Curt Weldon from Pennsylvania, who served in Congress for 20 years and recently became eCrypt's chairman. When Weldon retired in 2007 he was vice chairman of both the Armed Services Committee and the Homeland Security Committee.

Then there is Jay M. Cohen, a former Rear Admiral in the U.S. Navy who was Under Secretary for Science & Technology at the Department of Homeland Security. Cohen is now a principal in The Chertoff Group, a consulting group co-founded by former Homeland Security secretary Michael Chertoff.

Then there is Erik Mettala, the cyber chief scientist in the national-security-global-business unit of research-and-development company Battelle Memorial Institute. Mettalla had a 22-year career in the army, retiring as a lieutenant colonel. Before joining Battelle, he worked for McAfee, developing antivirus, antispam, intrusion prevention applications.

What is all this firepower doing at a company whose shares have traded at as low as a dime in the past year?

"We're a development-stage company," eCrypt Chief Executive Brad Lever said. "We've been under the radar...But we plan to have a very strong foundation to embrace the very significant opportunity that's coming our way."

Lever, Weldon and Cohen were kind enough to take my phone calls. But I am still somewhat afraid that if I really learned all what these guys were up to, I could end up in Guantanamo.

In a world of cyber warfare, embarrassing Wikileaks exposes, rumors of impending viral attacks on nuclear reactors and soldiers checking emails on battlefields, eCrypt has developed software that encrypts emails sent from any Internet-connected device.

Lever said the company is now rolling out military-grade email-security services for businesses and consumers at ecryptinc.com.

Founded in 2007, eCrypt is mostly the sweat of Lever and two other young brainiacs, Gabe Rosu and Kasia Zukowska. Their first big break came in a relationship with Research in Motion Ltd. (RIMM), the Canadian company that makes Blackberry smart phones. Now they are poised to encrypt emails from any device.

"We've been concerned about Internet security for our military...for almost two decades," said Weldon, the former Congressman. "Unfortunately, there's not been this attention for the public, and we're seeing massive amounts of PDAs and Blackberrys being sold."

The bottom line is this: When emails aren't safe, America isn't safe.

"The mom or dad with a son or daughter overseas in the military need to make sure that when they communicate, it's not being intercepted," Weldon explained.

Obviously, lawyers, doctors, accountants and other professionals need to ensure emails containing confidential information only go to intended recipients. Consumers need to be ever-vigilant against identity theft. And if you are an employee of any large corporation, you might want to encrypt any email in which you are talking smack about your boss. But this isn't a habit, even when it should be.

Sometimes, military-grade encryption software requires so many steps, people let down their guards and decide not to use it, Cohen said.

"You've got to remember passwords, and it's onerous" using the military-grade encryption software, said Cohen, who was once tasked with the Navy's response to the Y2K threat.

In contrast, he said, "the only difference between a normal email and an eCrypt email is about a one-to-two-second hesitation."

Technology companies from Microsoft Corp. (MSFT) to Google Inc. (GOOG) sell software and offer email accounts that are-all-too vulnerable to hacking. Since the advent of targeted online advertising, they have stood to make more money letting information leak out than holding it in, which is why it may be up to a little company to save us.

Vancouver, British Columbia, investor Strato Malamas said he bought a stake in eCrypt because he envisions it becoming part of the nomenclature as consumers learn more about the increasing dangers they face sending emails.

"You know how people say "Google it" or "text it'?" he said. "One day we'll be saying "eCrypt it.'"

(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. Contact Al at al.lewis@dowjones.com or tellittoal.com)